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Proving A Point

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Dr Ir Abdul Naser Abdul Ghani, Universiti Sains Malaysia.

Question and answer session.

Text Lawrence Julius

This time, at the fifth installment of the conference held on 12 April 2011 at the INSPEN center, discussions on the usage of Multiple Regression Model (MRA) for appraisals were raised, and the little of known MSMA guideline, among other topics. Present to officiate the conference was Y Bhg Dato’ Abdullah Thalith bin Md Thani, Director General of the Valuation and Property Services Department, Ministry of Finance Malaysia.

A title of much attention was The Impact of MSMA on Construction Costs – Small Scale Development. The research was conducted and presented by Dr Ir Abdul Naser Abdul Ghani from Universiti Sains Malaysia. The Manual Saliran Mesra Alam (MSMA) is a guideline approved by the government to help achieve a sustainable storm water management system solution, introduced by the Drainage and Irrigation Department Malaysia in 2002. Although the guideline was initially expected to be fully implemented 10 years after the point of approval, many are still in the dark about the procedures and even the existence of such guideline.

The MSMA is another “green” approach that developers may want to incorporate in their design to retain and/or dispose of storm water. From underground tanks to perimeter swales, the focus is to contain water from flowing too fast. To make it simple to understand, conventional drainage systems will continuously flow water to the collection point, causing floods at locations somewhere down the network. Should the MSMA system be implemented, storm water is “controlled” using various techniques to release water slowly down the network to prevent flooding due to overflow. This is one of the main points of the MSMA guideline and is certainly a good new sustainable effort developers should consider. Other countries like the United States, Australia, United Kingdom and China have all implemented their own version of the MSMA guideline to good effect.

Dr Taher Buyong, a professor from Universiti Putra Malaysia, talks about Advances in Property Price Modeling. This research highlights the limitations of the MRA model used in trend today when it comes to appraisals. According to him, the MRA model ignores spatial dependence and spatial heterogeneity. These are simply two inherent effects in property data. When these effects are ignored, it leads to a biased estimate of property value. In his presentation, Dr Taher highlights other models that has improved on the MRA, which can be grouped into three; spatial models, local models and geostatistical models.

According to Dr Taher, there is no single model that is good for all datasets. Some datasets are dominated with spatial heterogeneity where local models are relevant while there are some with no spatial effects, where the MRA model is relevant. What this means to property buyers, is the possibility of an inaccurate evaluation of their prospects with the popular MRA method. This study may prompt a better understanding for valuers more importantly, to understand the suitable usage of model when valuating property.

Puan Zahiriah Yahya and her research team from University Malaya continue the MRA discussion in Investigating the Characteristics of Problematic Residential Properties at Public Auction Sales Using MRA. This research was conducted to further understand the reasons why problematic properties are present, why it is in that state, and how to predict which properties will not do well in auctions. They characterize problematic properties as those that have not been sold after the third auction the property has gone through.

The research found the further away a property is from the city, the higher the risk for it to become problematic. Other factors that come into account other than location and amenities are site factors, building factors and cost factors and depreciation factors.  Poor road access, non-existent public transportation, unwanted site history, crime factor, poor management and vandalism are some of the focus points in this discussion. Although problematic properties in the Klang Valley are minimal compared to some of its neighboring states, the problem is still apparent. To lower the numbers, the points highlighted here could be a good place to start the fix.

The 5th NAPREC Conference certainly showed another side of property little known by the public. This is what goes on in the background – the complex analysis and test-runs, the long researching hours. We’ll always have more to learn but it plays an important role in structuring our property industry. It is to make sure we don’t hit any pot-holes, or to at least, see it coming.

National Real Estate Research Coordinator (NAPREC)
Coordinated by the National Institute of Valuation (INSPEN) under the Valuation and Property Services
Department (JPPH), Ministry of Finance Malaysia.
The Real Estate Research fund was allocated by the Malaysian government since the 8th Malaysia Plan.

NAPREC funding is available to pre-identified public real estate research organizations and institutions of higher learning.